On September 28, the African Textile Industry Special Dialogue, co-sponsored by the Textile Industry Branch of the China Council for the Promotion of International Trade and Messe Frankfurt (Hong Kong) Co., Ltd., and specially supported by the Jiangsu Textile Industry Association, was held at the National Convention and Exhibition Center (Shanghai) . Xu Yingxin, Vice President of China Textile and Apparel Federation and Executive Vice President of Textile Industry Branch of China Council for the Promotion of International Trade, Adamn Assefa, Deputy Consul General of Ethiopian Consulate General in Shanghai, Zhou Yejun, Chairman of Wuxi Yimian Textile Group Co., Ltd., Inner Mongolia Luwang Cashmere Co., Ltd. Chairman Zheng Haosheng and director Zhu Xingjian of Wuxi Zhongtian Silk Road Yunlian Textile Co., Ltd. shared first-hand information on investing in Africa with more than 100 guests. Liu Yaozhong, deputy director of the International Trade Office of China Textile Federation, presided over the dialogue.
Africa: the next value depression for the textile industry
Africa is the second largest continent in the world, with an area of 30.2 million square kilometers, more than three times the area of our country. Its GDP ranks fourth among the six continents in the world. It is rich in cotton and oil resources and has huge economic development potential. . Africa also has cheap manufacturing costs, a young population structure, rapid economic growth, strong demand in emerging markets, etc., making it more suitable to develop a textile industry that can absorb more jobs.
However, Africa has not yet formed a complete textile industry chain. Although some countries are rich in raw materials such as cotton, most African countries have to import large amounts of textile accessories for the production and processing of finished products such as clothing, resulting in a long product manufacturing cycle and the inability to meet stringent rapid response orders. At the same time, the added value of African textile processing products is low, which also shows Africa’s weak textile industry production capacity.
The huge industrial complementarity has enabled China-Africa textile trade to continue to grow in recent years. According to statistics, from 2010 to 2017, China’s textile and apparel exports to Africa increased from US$11.097 billion to US$18.365 billion, with an average annual export growth rate of 7.46%. Africa’s share of my country’s total global exports of textiles and apparel has increased from 5.2% to 6.7%. In particular, textile exports have grown rapidly. Africa’s proportion of my country’s total textile and apparel imports increased from 0.5% in 2010 to about 1% in 2017, and the import value increased from US$100 million to US$260 million during the same period. Among them, clothing imports account for more than 90%.
When analyzing the comparative advantages and practical challenges of developing Africa’s textile industry, Xu Yingxin pointed out that in terms of comparative advantages, Africa’s average age is only 20 years old, and labor is cheap. It is expected that by 2025, Africa will have 200 million people aged 15 to 15 years old. Young people aged between 24 years old; have an excellent foreign trade environment, and have preferential market access policies for exports to Europe and the United States; in terms of export incentives, a number of incentive policies such as export tax rebates, free foreign exchange convertibility, tax incentives, and convenient financing have been implemented; in addition, Africa The middle class is growing rapidly, and consumer spending in Africa is expected to reach US$1.4 trillion by 2020.
The opportunities are great and the challenges cannot be ignored. In Xu Yingxin’s view, Africa’s industrial foundation is weak, the development of the textile industry chain and supporting facilities are imperfect, product delivery cycles are long, and it cannot meet the demand for rapid order response. There is a lack of skilled labor, workers’ wages are growing rapidly, and the political and social environment is also unstable. Unstable.
Ethiopia, located in the Horn of Africa, has become a hot spot for investment by Chinese textile companies. Why is Ethiopia so popular? In addition to the country’s obvious comparative advantages, Mr. Adamn specifically mentioned that Ethiopia has political stability and investment in the textile industry has become the preferred industry for government support. In terms of industrial policy, the national industrial policy focuses on export orientation and gives priority to the development of import substitution industries. The government draws on China’s experience and takes the lead in developing textile industrial parks to attract companies to move in. In terms of markets, exemption from tariffs and quotas when entering countries such as the United States, the European Union, and Japan is also an important consideration. The Ethiopian government has also launched a textile industry development plan, with the goal of exports reaching US$779 million by 2020, employing 174,000 people, and ranking among the top five exporters in Africa. To this end, the government has also established a Textile Industry Development Research Institute to devote itself to the research and development of textile technology. Adamn said that integrated textile factories, spinning, weaving, printing and dyeing, and garments are the areas with the greatest potential for investment.
Textile Enterprises: How to Seize New Opportunities
Considered overseas as China’s most advantageous cotton textile enterprise, Wuxi Yimaan’s every move has attracted great attention from the industry. Next year Wuxi No.1 Cotton will enter the 100th anniversary of its establishment. As a “century-old factory” Wuxi No.1 Cotton is thinking about how to find new opportunities and how to successfully navigate the “next hundred years”. The new opportunity is to “go global”. But to where? Chairman Zhou Yejun revealed that at a council meeting of the China Textile Federation a few years ago, she was greatly inspired by the advice of economist Lin Yifu. Lin Yifu said that Africa is the last low-value land in the world. Zhou Yejun remembered this sentence, and from then on Wuxi Yimian set his sights on Africa. “Wuxi No.1 Cotton is a state-owned enterprise. Risk control is the first priority. The investment location must have a good relationship with China.” Ethiopia has a long history and culture, and the government very much welcomes investment in the textile industry. After many investigations, Ethiopia’s rich resources, national policies to encourage investment, export tax exemptions, and abundant labor force all aroused Zhou Yejun’s great interest. In particular, the price of electricity is the lowest in the world, which is very important for a textile company.�It is very important for enterprises, and this has also become an important factor in Wuxi Yimian’s decision to invest.
Africa has a hot climate in people’s minds. Zhou Yejun said that the city of Dire Dawa chosen by Wuxi Cotton Co., Ltd. has spring-like conditions all year round. It is most suitable for spinning that requires constant temperature conditions, and the workshop does not even need air conditioning. Such suitable conditions made Wuxi No. 1 Cotton’s journey from inspection to signing of the agreement to starting construction and laying the foundation smooth. The first phase of the 100,000-spindle project is expected to be put into operation in the second half of 2019. “Wuxi Yimian will become a benchmark enterprise in Ethiopia.” Zhou Yejun said confidently.
Investment: Consider comprehensive costs
Production costs are undoubtedly the most important concern for every enterprise that invests in Africa. In addition to water, electricity, gas and other costs, low labor costs are a major comparative advantage of Africa, but it is not all. Zhou Yejun believes that Ethiopia has the lowest labor costs, but it must also be considered that this is related to production efficiency. Wuxi No.1 Cotton invested 300,000 spindles and employed 3,000 local people. It took into account the actual local conditions and did not use the most advanced automation equipment. The most critical thing to reduce costs is how to train skilled employees within the company, respect local customs, respect local culture, care for employees, and make them willing to stay and work in the company.
Zheng Haosheng said that Africa is most suitable for the development of the textile industry, and local people feel honored to work in foreign-funded enterprises. Over the past two decades, the company has trained a large number of industrial workers, and the current production efficiency is almost the same as that in China. The company places design and difficult production in China, while relatively simple production is placed in Africa.
Zhu Xingjian believes that the consideration of cost is a comprehensive cost. Although labor costs in Egypt are higher than those in Ethiopia and Madagascar, production efficiency will also increase. In addition, Egypt’s power supply is also relatively stable, and natural gas resources and water are also guaranteed. Similarly, we should also pay attention to the tariffs on raw materials in each production link, as well as transportation costs. These comprehensive factors determine the relative cost. “‘Going global’ is not as good as you think, but it is not as bad as you think.” Zhu Xingjian reminded enterprises to look at cost advantages objectively and comprehensively.
The guest’s introduction and experience sharing left every audience member feeling unsatisfied. “Africa is very attractive and we are paying close attention to it,” said an entrepreneur from Guangdong who is engaged in the production of excipients and accessories.
Africa, a new continent with extremely rich resource endowments, is attracting the attention of many Chinese advantageous textile companies with its comprehensive advantages such as demographic dividend, preferential export tariffs, and low energy costs.
